FTX-SBF charges valid despite lack of US crypto laws, DOJ says

Sam Bankman-Fried’s counsel had argued that FTX was not located in the United States, and as SBF did follow regulatory obligations concerning FTX US, charges related to FTX international shouldn’t apply.

The United States Department of Justice (DOJ) filed a motion in court on Oct. 4, claiming the lack of crypto regulations in the U.S. is no bar to the criminal charges made against former FTX CEO Sam Bankman-Fried (SBF).

The DOJ’s letter was filed in response to the defendant’s request for clarification and reconsideration of charges related to the misappropriation of funds in FTX. Lawyers for SBF argued that their client was “not guilty because FTX was not regulated in the United States, and he followed the rules concerning FTX US.”

The DOJ called this argument irrelevant, claiming that even though the existence of legislation may be necessary to prove a legal obligation, the lack of it does not affect whether the defendant’s victims committed money to him. The DOJ noted that the defendant’s claim about a lack of regulations related to customer funds usage is false as there are existing rules against it.

The DOJ further argued that the existing laws prohibit companies from stealing customer assets, and the defendant has been charged under the same. Furthermore, the defendant committed substantial misrepresentations to customers, as well as having stolen money from them.

The DOJ argued that it is irrelevant to whether the defendant made substantial misstatements or omissions in the supposed “absence of clearly applicable laws or regulations.“ It cannot be proven that the wire fraud allegations are “actus reus,” meaning guilty act, regardless of whether there is regulation or not.

SBF is currently facing multiple charges of wire fraud and misappropriation of customer funds, among others. The former FTX CEO is currently in jail for violating his bail conditions and trying to influence potential witnesses. However, he has appealed — to no avail — several times to be released on bail before the trial commences. SBF’s legal team cited a lack of internet connectivity hindering his defense preparations, as well as no vegan meal options.

SBF faced his first day of jury trial on Oct.3, with reports suggesting the trial could last as long as six weeks.